New year gift to farmers from RBI, raises collateral-free loan limit, will be effective from...

The Reserve Bank of India (RBI) has announced an increase in the limit for collateral-free agricultural loans will be increased from Rs 1.6 lakh per borrower to Rs 2 lakh, effective from January 1, 2025. According to the Ministry of Agriculture and Farmers Welfare, this decision is aimed at addressing the rising input costs and the growing financial challenges faced by farmers, particularly amid inflationary pressures on agricultural inputs.

The new policy allows farmers to access loans for agricultural activities, including allied sectors, without the need to provide collateral or meet margin requirements.

The RBI has directed banks across the country to expeditiously implement the revised guidelines, ensuring that financial assistance reaches farmers promptly.

Additionally, banks have been instructed to provide wide publicity to the changes to ensure that farmers and other stakeholders are well-informed about the updated loan provisions.

This move is expected to provide enhanced financial access to small and marginal farmers, who represent over 86% of the agricultural sector.

With collateral-free loans, farmers will no longer face the burden of offering assets as security to secure credit. This is anticipated to reduce borrowing costs and make it easier for farmers to invest in their agricultural operations, boosting productivity and livelihoods.

In addition to the collateral-free loan limit, the RBI's policy will likely increase the uptake of Kisan Credit Card (KCC) loans, enabling farmers to meet their operational and developmental needs.

The initiative also complements the Modified Interest Subvention Scheme, which offers loans up to Rs 3 lakh at an effective interest rate of 4 per cent.

This combined approach strengthens financial inclusion in the agricultural sector, supports sustainable farming practices, and aligns with the government's long-term vision for enhancing agricultural growth and economic resilience.

(Except for the headline, this story has not been edited by DNA staff and is published from ANI)